Financial Transactions and Regulatory Compliance Review

The Biggest Driver of Private Equity Deal Activity

Private equity is continuing to attract investor capital as 2017 closes, despite increasingly tough conditions for buyouts. With new fundraising contributing to an already record amount of dry powder, PE firms are facing a competitive dealmaking landscape and rising valuations for targets.

Toppan Vintage, a trusted financial printing and communications company, in partnership with Mergermarket, is pleased to present the newest edition of M&A Pulse newsletter. This newsletter features responses from US-based senior corporate executives who shared their insights on the current and future state of unicorn companies.

Toppan Vintage question: What do you believe is the biggest driver of private equity deal activity?Leading deal experts weigh in...

Our experts are rather evenly split when it came to the top drivers of PE buyouts as of Q4 2017. Nearly one-quarter (24%) feel that sector-specific trends were having the greatest influence. A separate 16% name four other drivers each: the general improving economic outlook; record levels of available capital; consistently strong investor returns; and the presence of corporations looking to make divestments.

When it comes to sector-specific trends, there are certainly a number of sectors that saw substantial growth in PE activity in 2016. The technology, media & telecommunications industries had 588 buyouts valued at US$99.8bn last year, which is 48 more deals and a 7% increase in value compared to 2015. The energy, mining & utilities sector experienced even more explosive growth, reaching 160 deals worth US$63.9bn in 2016 – an increase of 29 acquisitions and a 137% surge in value from the previous year.

The economy is also clearly rebounding impressively worldwide. The International Monetary Fund has projected global growth of 3.6% in 2017 and 3.7% in 2018. “Broad-based upward revisions in the euro area, Japan, emerging Asia, emerging Europe, and Russia more than offset downward revisions for the US and UK,” the IMF said in its October 2017 global economic outlook.

One of our survey respondents, a managing director at a growth equity PE firm focused on technology and healthcare, pointed out that PE has also recently outperformed other alternative asset classes, such as hedge funds. “At present, PE funds are some of the best performing investments in terms of returns,” the managing director said. “The past few years have frankly been very bad for some other investment alternatives, but PE has performed well. This has helped funds to gather a strong capital base.”

Private equity is continuing to attract investor capital in 2017, despite increasingly tough conditions for buyouts. With new fundraising contributing to an already record amount of dry powder, PE firms are facing a competitive dealmaking landscape and rising valuations for targets. Volatility across global markets raises the question of which regions and sectors will see the most PE activity in the year ahead.

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